Would You Rent A $1.3M Home Out Or Cash It In?

[Danny N.]

I decided that I am moving to my vacation property full time and am unsure what to do with my main residence. It's in great neighborhood, actually in one of the 10 most expensive zip codes in the US, so future appreciation seems likely. I owe a little over $200,000 on the mortgage and the home is worth $1.35-$1.4M. It's a 3400 sq ft 4 bedroom 3.5 bath residence with a 600 sq ft 1/1 guest house in the backyard making it a total 4000 sq ft. I dont know how the high end rental market is in the area, but I see closed listing of similar homes in the $5000-6000/mo range. My property tax bill was around $22,000 for last year, and insurance isnt too bad on the home. At $5000/mo minus 10% rental fee it would be around $4500/mo gross and would basically cover all bills. I dont have long left on my mortgage around 8 years and its mostly principal now.

With that said what would you do?

1) Pay off the home and net $25-30k annually after property taxes

2) Rent it out and have renter pay off the home

3) Rent it out furnished, its in one of the biggest cities in america, and furnished corporate rentals I imagine get more, Id prefer this bc I dont know what to do with my belongings

4) Sell it and walk away

I know the cap rates aren't the highest, I have some rental properties in florida that are also low cap rates but they all have significant upside potential so I understand the tradeoff. I know 1% rule doesn't work in prime real estate, I mean $5000/mo would be 1% on my cost basis from the purchase long ago.